The boosted stimulus package allocates additional $370B for small business loans and grants to offset the economic impact of the COVID-19 pandemic.

Congress just replenished the landmark CARES Act with $370B in funding earmarked for small businesses. The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, outlines a series of measures aimed at helping small businesses that have been adversely affected by the COVID-19 pandemic. The legislation offers tax rebates, tax-filing extensions, and modified tax treatments along with business loans and emergency grants aimed at bolstering small businesses and their employees during these challenging times. This second wave of funding puts more money on the table for small businesses seeking Paycheck Protection Program loans and Economic Injury Disaster Loans.

Since the very beginning, CoverHound and CyberPolicy have been solely focused on supporting the small businesses that make up the foundation of this nation’s economy. We have put together this little cheat sheet that outlines some strategies to utilize stimulus funds available to small businesses like yours.

Low and Zero interest loan programs available to small businesses.
Funds available in this updated relief package are allocated to loans administered through the Small Business Administration (SBA).

Paycheck Protection Program (aka PPP) // $310 billion available

PPP loans of up to $10 million cover payroll-related expenses. These loans have a few qualifications, mostly related to employee counts and business size, offer loan forgiveness opportunities and require no personal guarantees or collateral. PPP funds will be administered by banks, credit unions, and other financial institutions (SBA 7a approved lenders).

Economic Injury Disaster Loan (aka EIDL) // $60 billion available

These loans can be obtained in amounts up to $2 million, with standard interest rates of 3.75% for small businesses and 2.75% for nonprofit businesses with various repayment terms for each. EIDL will be administered by the SBA itself.

An emergency advance of up to $10,000 can be obtained to cover business expenses that will ensure immediate and ongoing operations. In the event that an advance is disbursed and the application is denied, the advance does not need to be repaid.

Special Note: Come tax time, there are also payroll tax deferment and tax credits available to employers. See details in the resources section.

Repayment Terms & Loan Forgiveness

Both PPP and EIDL funds have different repayment terms that borrowers need to consider.

Small businesses that receive PPP funding to cover eligible expenses through June 30th, 2020, can apply for loan forgiveness; essentially turning the loan into a grant.

Eligible expenses for PPP loan forgiveness:

Payroll costs

Interest on mortgage

Rent payments

Utility payments

Compensatory wages for tipped employees

EIDL Repayment

EIDLs have fixed interest rates of 3.75% for for-profit businesses and 2.75% for nonprofit businesses and repayment terms that can extend up to 30 years based on your ability to repay the loan. The loan terms you can expect with EIDL look like this:

EIDL funds are available to the following businesses with 500 or fewer employees:

Sole proprietorships, with or without employees

Independent contractors

Cooperatives and employee owned businesses

Tribal small businesses

Small agricultural cooperatives

What should you do?

Apply for PPP or EIDL, or both, ASAP! Lenders are accepting applications on a first-come, first-served basis. It is important to note that neither the FED nor lenders maintained a backlog of applicants from the first application period. If you submitted an application after the funds were exhausted or your application was denied, you will need to reapply.

PPP is the obvious first step. The PPP loan approval process and disbursements are being expedited and applicants can expect a response within a few days of submission. Every company should apply for PPP funds if they qualify. Please see The Small Business Owner’s Guide to the CARES Act for more information regarding qualifications.

Strongly consider applying for EIDL, but make your decision quickly. Applications for EIDL loans will be reviewed in the order that they are received. Given the much smaller allocation ($60 billion), funds will likely be exhausted quickly.

How to apply

PPP - If you have an existing banking relationship with a SBA 7a lender, call them directly for instructions how to apply. Otherwise, visit the U.S. Small Business Administration’s Paycheck Protection Program for details on how to connect with a SBA 7a lender or a federally insured depository institution, federally insured credit union, or Farm Credit System institution that is participating in this program.

The documents required to apply for the Paycheck Protection Loan program include:

IRS Form 940

IRS Form 941

Articles of incorporation

Bylaws/operating agreement

Color copy of all owners’ driver’s licenses

Payroll summary report or employee pay stubs

Most recent filing of IRS Form 1099-MISC

Trailing 12-month profit and loss statement

Most recent business mortgage or rent statements

Most recent business utility bills

EIDL // Apply for EIDL online directly through the U.S. Small Business Administration on the EIDL Application Page.

The documents required to apply for EIDL varies depending on your specific business situation. We recommend that you compile the same documents listed in the PPP application process before you begin your EIDL application; as many of these documents will likely be the same.

Resources
Here is a shortlist of the best summary guides we’ve found to date.